Would President Romney Sell Uncle Sam's GM Stake?

Agenda-Setting Financial Insight.
Feb. 16 2012 11:39 AM

Pragmesidential: Would President Romney Really Sell Uncle Sam's GM Stake?

Republican presidential hopeful Mitt Romney urged the Obama administration to sell its investment in General Motors this week, but did he mean it?

Photo by EMMANUEL DUNAND/AFP/Getty Images

Mitt Romney may be unsure which hat to wear when it comes to General Motors. In a Detroit News article this week, the Republican presidential candidate exhorted President Barack Obama’s administration to offload Uncle Sam’s holding in the automaker, which reported fourth-quarter earnings on Thursday. That may be Political Romney’s take, but selling now would leave taxpayers with a hefty loss. That’s a hit Private Equity Romney would surely avoid. 

Romney is right that governments should try not to hold long-term positions in private companies. So if the U.S. government were to sell its 32 percent of the Detroit automaker immediately, that would superficially satisfy Romney’s belief in free-market capitalism. 

But at Wednesday’s closing share price, doing so would leave taxpayers shouldering a $14 billion loss on their GM investment - almost a third of what Presidents George W. Bush and Barack Obama poured in to keep the company on the road. Not only would crystallizing that loss offend Romney with his private equity background. It’s also a sure bet that Romney the presidential candidate would have pounced on it as evidence of Obama’s fiscal irresponsibility. 

Of course, it’s not quite the same as a private equity investment - price shouldn’t trump everything else. The U.S. government invested in GM, Chrysler and hundreds of banks to keep them afloat, not to make a profit. Even so, it isn’t hard for the government to explain why it’s OK that it still holds a significant stake 15 months after GM went public. 

Executive pay aside, officials have not interfered with the automaker’s business; the fact that its investment has largely been a non-issue for months speaks to that. And the Treasury has proved adept at getting out of other bailout positions relatively quickly and at a profit - just the kind of responsible approach Romney advocates. That should give non-partisans comfort that the GM stake is receiving the same treatment. 

There’s also a reasonable case that GM’s market value will rise over the next year or more as it continues working on its turnaround, especially in its loss-making European operations. If Romney finds himself in the Oval Office next year and he’s able to sell the GM stake at a profit, both his political and private equity personas will find it hard to resist taking the credit.

Read more at Reuters Breakingviews.

Antony Currie has more than a decade of experience as a financial journalist, having worked with Euromoney since 1996, most recently as a US editor. He has worked on assignments in the major financial centres of Europe and the US and written stories on capital markets, global economies and the investment banking industry.



Smash and Grab

Will competitive Senate contests in Kansas and South Dakota lead to more late-breaking races in future elections?

Stop Panicking. America Is Now in Very Good Shape to Respond to the Ebola Crisis.

The 2014 Kansas City Royals Show the Value of Building a Mediocre Baseball Team

The GOP Won’t Win Any Black Votes With Its New “Willie Horton” Ad

Sleater-Kinney Was Once America’s Best Rock Band

Can it be again?


Forget Oculus Rift

This $25 cardboard box turns your phone into an incredibly fun virtual reality experience.

One of Putin’s Favorite Oligarchs Wants to Start an Orthodox Christian Fox News

These Companies in Japan Are More Than 1,000 Years Old

Trending News Channel
Oct. 20 2014 6:17 PM Watch Flashes of Lightning Created in a Lab  
  News & Politics
The World
Oct. 20 2014 1:50 PM Why We Shouldn’t Be Too Sure About the Supposed Deal to Return the Abducted Nigerian Schoolgirls
Oct. 20 2014 7:23 PM Chipotle’s Magical Burrito Empire Keeps Growing, Might Be Slowing
Dear Prudence
Oct. 20 2014 3:12 PM Terror Next Door Prudie advises a letter writer whose husband is dangerously, violently obsessed with the neighbors.
  Double X
The XX Factor
Oct. 20 2014 1:10 PM Women Are Still Losing Jobs for Getting Pregnant
  Slate Plus
Tv Club
Oct. 20 2014 7:15 AM The Slate Doctor Who Podcast: Episode 9 A spoiler-filled discussion of "Flatline."
Brow Beat
Oct. 20 2014 9:13 PM The Smart, Talented, and Utterly Hilarious Leslie Jones Is SNL’s Newest Cast Member
Future Tense
Oct. 20 2014 4:59 PM Canadian Town Cancels Outdoor Halloween Because Polar Bears
  Health & Science
Medical Examiner
Oct. 20 2014 11:46 AM Is Anybody Watching My Do-Gooding? The difference between being a hero and being an altruist.
Sports Nut
Oct. 20 2014 5:09 PM Keepaway, on Three. Ready—Break! On his record-breaking touchdown pass, Peyton Manning couldn’t even leave the celebration to chance.